Many taxpayers are confused about how long to keep tax records. The term “tax” refers to their tax returns and documents supporting the information contained in the yields. These documents can include receipts, bank statements, 1099, etc. If you are one of the unlucky few to be audited, these records will be vital to reject outside the IRS.

Tax refunds

To guard against a bad audit, which should have all their taxes indefinitely. The IRS has been known to lose or misplace tax. Defenders of the conspiracy, while arguing that this is evidence of a nefarious scheme, the simple fact is that the IRS receives millions of returns over a period of three months and lost returns are inevitable. So how do you protect yourself? Save copies of each tax return.

A quick word on the IRS e-file program. If you file their statements electronically, be sure to get copies of the company that filed your return. All these entities are required by law to provide paper copies.

Support for tax records

You should keep tax records for a period of six years from the date the returns were actually filed. In general the IRS only has three years to the audit of the filing date. For example, if you filed your 2000 tax return April 15, 2001, the IRS would have to initiate an audit on April 15, 2004. Note that if you filed an extension, the IRS will have three years from the date you submitted the return. As always happens with taxes, there are exceptions to this time period.

If your tax return is seen as the great American novel, the operation of the three years of audit period could not save. Failure to report more than 25% of its gross income gives the IRS an additional three years to pursue you. Using the example above, the IRS will have until April 15, 2007 to audit your 2000 tax return.

Property records – Get a file

You may need to get a file if own property for an extended period of time. For example, suppose you bought a house in 1980 for $ 100,000 and $ 50,000 in improvements over the years. You need to keep the purchase records, mortgage statements and receipts that relate to the improvements. When you sell your home, you need the records to determine the tax consequences of the sale, namely its basis (original cost plus improvements) and profit. If the IRS decides to take a closer look at the benefits, you have to give their support to the tax records claims. Once you actually sell the property, it is recommended that you keep all tax records for a further period of six years.

Divorce

Be sure to keep copies of all your financial documents, tax returns and supporting documents if you get divorced. You should also keep copies of all divorce agreements and court orders that cover property and financial matters. When couples divorce, the tax credit and can be nightmarish. If you do not keep records, you have to ask your ex-spouse for them. Get the records now to avoid duplication of their misery!

Hopefully, that will never need to show your tax records to the IRS. If you are one of the unlucky few that is audited, your tax records should keep your feet off the fire.

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This entry was posted on Friday, April 17th, 2009 at 8:03 am and is filed under TAXES. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.